Russian central bank proposes blanket ban on crypto mining and trading

Published at: Jan. 20, 2022

In a report published on Thursday, The Central Bank of Russia has called for a blanket ban on domestic cryptocurrency trading and mining.

The report titled "Cryptocurrencies: trends, risks, measures" compares cryptocurrencies to a Ponzi scheme and calls for a complete ban on their use throughout Russia. The authors claim that cryptocurrencies are highly volatile in nature and are being used as a tool for illegal activities. The report also warned that crypto could pose a risk to financial sovereignty and could aid people in taking money out of the national economy. The report read:

“Potential financial stability risks associated with cryptocurrencies are much higher for emerging markets, including Russia.”

The Russian central bank demanded a complete ban on over-the-counter (OTC) trading desks, crypto exchanges as well as peer-to-peer exchanges. The report also called for reinforcing the crypto payment ban and the introduction of strict punishment for any violations.

The central bank report further proposes a complete crypto mining ban in the country, claiming that mining activities create new supply which leads to demand for other crypto services such as exchanges. Crypto mining could undermine the existing green energy agenda and also disrupt Russia’s energy supply. The official paper read:

“Crypto mining creates a non-productive electricity expenditure, which undermines the energy supply of residential buildings, social infrastructure and industrial objects, as well as the environmental agenda of the Russian Federation."

Russia became the third-largest Bitcoin (BTC) mining hub following China’s crypto mining ban in May. If acted upon, the latest proposal for a blanket ban on crypto mining in the country could lead to yet another realignment on the world's crypto mining map.

According to a Bloomberg report, Russia's Federal Security Service (FSB) was instrumental in advancing the ban, having lobbied central bank governor Elvira Nabiullina to pursue a hardline course. The report claims that the FSB is worried about the increasing number of untraceable funding to opposition parties and media via crypto.

The report is framed as an invitation for public discussion, with the deadline for comments and suggestions from interested parties set at March 1, 2022.

The central bank of Russia has been skeptical of cryptocurrencies for quite some time. However, what could be seen as signs of president Vladimir Putin’s interest in and understanding of crypto led some to believe that the Russian government might choose to regulate the decentralized industry rather than ban it.